Banking the unbanked: Proposed business model for financial inclusion at low transaction cost

Abstract

By financial inclusion, we mean delivery of banking services and credit at an affordable cost to the vast sections of disadvantaged and low income groups. The various financial inclusion services include savings, insurance, bank accounts, financial advice, payments & remittances, and affordable credits as shown in the diagram below. This definition encompasses the concept’s two, primary dimensions (United Nations, 2006). Firstly, financial inclusion refers to a customer having access to a range of formal financial services, from simple credit and savings services to the more complex such as insurance and pensions. Secondly, financial inclusion implies that customers have access to more than one financial services provider, which ensures a variety of competitive options. Flowing from this definition, financial exclusion would mean the inability of the disadvantaged to access financial services. A range of obstacles could lead to financial exclusion; barriers include geography (limiting physical access), regulations (lack of formal identification proof or of appropriate products for poor households), psychology (fear of financial institution's staff, structures, complicated financial products, etc.), information (lack of knowledge regarding products and procedures), and low financial acumen (low income and poor financial discipline), among others.